Rocky times for the phosphate industry, hit by world surplus

By
Warren Richey, a staff correspondent of The Christian Science Monitor /
May 25, 1983

Amman, Jordan

Phosphate rock is the oil of Jordan. The mineral, a basic ingredient of fertilizers, is one of the only exploitable natural resources available in this desert nation - and there's plenty of it. Layers of phosphate rock of varying thickness are estimated to cover 60 percent of the area of Jordan.

''It's the only resource we have. It's our oil, so to speak,'' says Ziyad Annab, general manager of Jordan's Industrial Development Bank.

Over the years the Jordanian government, anxious to cash in on its major resource, has made considerable investments in expanding the production capacity and export facilities of the Jordan Phosphate Mines Company, which is 90 percent government owned. The government has even built a $400 million fertilizer plant in Aqaba to refine the rock and export it as a finished product.

For a while, things looked good as production, revenues, and profits edged upward. Jordan became the world's third-largest exporter of phosphates (with 5 percent of the world market) after Morocco and the United States. The phosphate company became the largest industrial employer in Jordan with a $50 million annual payroll including 4,000 employees.

Then in 1980-81 the market peaked.

Since then, the world market price for phosphate rock has fallen from $50 a ton to below $30. The story in Jordan has become one of attempting to keep up much-needed export revenues by pushing up production at a time of falling prices in a glutted world market.

Phosphate is Jordan's single largest source of export earnings, accounting for about one-third of the total.

To diversify where possible and to boost export earnings, the government has emphasized development of other industries such as potash, chemicals, and light manufacturing. A major facility designed to extract potash from the Dead Sea began operations in mid-1982. In addition government plans are to double the capacity of the Jordan cement industry to 2 million metric tons a year, with the hope of eventually exporting cement.

But for the near term the world market price of phosphates will be a key boost or drag to Jordanian exports.

''It is our only natural resource, it is our wealth,'' says Wasef Azar, managing director of the Phosphate Mines Company.

Sales increased from 3.5 million tons in 1981 to 3.8 million tons in 1982, but during the same period sales revenue fell from $211 million to $204 million.

According to Mr. Azar, company profits have slid from an all-time high of $36 million in 1980, down to $30 million in 1981, and to $15 million last year. The managing director says that unless the world market picks up this year the company faces a ''real chance'' of incurring a loss in 1983. He made the forecast despite his expectation that the company will boost exports by 10 percent this year.

The price of Jordan's highest-quality phosphates has fallen from $58 a ton in 1980 to about $38 a ton at present. Mr. Azar said the Jordanians had traditionally been able to undercut US phosphate prices because transportation costs to Jordan's key export markets in India, Asia, and East Europe are lower than shipping charges from the US.

But he said that as a result of the the current market situation the US phosphate firms are cutting their prices and ''dumping'' excess production below cost on the world market. As a result, Mr. Azar said, Jordan's selling price is now approaching Jordan's own production costs - the cost of mining, refining, and transporting the phosphates.

Mr. Azar attributes the demise of the phosphate market to the world economic slowdown and to US government programs which pay subsidies to farmers not to grow crops.

The managing director says the subsidies ''mean less use of fertilizer in the States; and less use of fertilizer in the States means lower prices and dumping of surpluses overseas.''

He adds, ''It is hurting everybody.''

In the absence of any firming of the market, the company management has adopted cost-cutting measures and has moved to fire unproductive workers. The dismissal of 224 workers last year led to a one-day strike which shut down one of the company's three mines. Strikes in Jordan are generally illegal and as such are extremely rare.

As required by law the Ministry of Labor intervened and worked out a compromise between management and the union whereby the company agreed to hire back 17 of the dismissed workers. (Fifteen have since returned to their jobs.)

Mr. Azar says he and the labor leaders have had frequent meetings and that the company is now ''on good terms'' with the union. But he says that if necessary there will be more layoffs.